Optical products company Tellium Inc. and access equipment vendor Zhone Technologies Inc. have signed a definitive merger agreement.
“Combining the two businesses enables us to provide a comprehensive solution for local, metro and long distance service providers as we see their needs converging,” says Mory Ejabat, current chairman and CEO of Zhone, who will be chairman and CEO of the combined company, which will operate under the name Zhone Technologies. “The merger will allow the combined company to realize substantial cost savings from reductions of operating expenses.”
The transaction is expected to close this fall.
Under the terms of the agreement, the security holders of Zhone would receive 60 percent of the combined company’s outstanding fully-converted shares at closing and the security holders of Tellium would continue to hold the remaining 40 percent of the combined company’s outstanding fully-converted shares as of closing. Based on Tellium’s current number of fully-converted shares outstanding, Zhone would receive approximately 197 million newly issued shares, options and warrants to purchase shares of Tellium common stock as of closing. The exact number of Tellium shares to be issued will depend on Tellium’s fully-converted shares outstanding immediately prior to closing. The proposed stock-for-stock transaction is intended to qualify as tax-free to the stockholders of Tellium and Zhone.
The combined company has a combined cash position of over $150 million as of June 30, 2003. Its customer base includes some of the world’s largest carriers representing more than 250 existing carrier customers on six continents.
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